A new study shows leaving EU customs union could cost UK £4 billion a year

  • A new study has suggested that leaving the customs union as part of Brexit could cost UK traders £4 billion a year.
  • The report from the Institute for Government says that up to 180,000 businesses could be affected.
  • The report calls on the government to be clear on its customs plans in order to avoid a “canyon” on Brexit day one.

LONDON — New customs arrangements after Brexit could cost the UK £4 billion a year and cause massive disruption to trade and business, a new study has warned.

The Institute for Government’s “Implementing Brexit: Customs” report, published on Monday, says up to 180,000 British traders could be affected by the UK leaving the customs union and that there is the real threat of a “cliff-edge.”

The report describes the task facing government of implementing new customs arrangements by Brexit day in March 2019 as “huge” and suggests changes will have to be made to over 30 government bodies and 100 local authorities.

The study also claims that “there is a cliff edge at the other side of the English Channel too” with Brexit impacting European ports such as Calais or Rotterdam, which could cause massive disruption to trade into the UK.

Joe Owen, a senior researcher at the IfG and co-author of the report, said: “The UK Government is only one of many players who need to be ready if disruption is to be minimised on day one after Brexit. But the problem is that everyone from port operators to small traders can only undertake limited preparation while future arrangements are so uncertain.

“When it comes to customs, business faces a canyon, not a cliff edge. Disruption can be caused from either side of the border, and we are reliant on the successful preparation of our European partners too.”

The report suggests that the need to implement increased administration for new customs declarations could cost British businesses £4 billion a year.

It says: “Until they [UK businesses] are given some certainty on what is required from them on day one, the amount of this work that can take place is limited.”

In a position paper published last month, the Department for Exiting the EU (DExEU) said Britain will leave the customs union but seek to negotiate a bespoke, time-limited transitional deal including as many benefits of customs union membership as possible, in order to “minimise disruption” for British business.

Brexit Secretary David Davis told MPs last week: “We’re starting from the aim of maintaining as much continuity as is necessary … we may well seek a customs arrangement for that period and a similar arrangement on single market provisions, but we cannot make that decision ourselves.”

The report recommends the approach the government should take to avoid a “cliff-edge,” which includes “moving customs requirements away from the physical border, retaining access to key EU computer systems and establishing working groups on implementation details with the private sector.”

Also key is the government putting into practice its plans for a technological solution, but the report says the government must be realistic about what is feasible.

Marcus Shepheard, a researcher at the IfG said: “The Government has said that new technology will help, but has provided little clarity about how. In fact, it seems unable to manage existing technology. So with less than two years to go, ministers must be clear about what is and what is not feasible.”

Last month, Owen told Business Insider the government’s proposed customs arrangements would not create “frictionless” trade following Brexit even if implemented in full.

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